Monday, July 31, 2017

Residential Mortgage Commentary - week of July 31, 2017

The Bank of Canada appears to have adopted the stance
that any excuse to raise interest rates is a good excuse. If that is
true then the latest economic data puts us on track for another hike
later this year.
The latest GDP numbers came in above forecast, bolstering the bank’s
rosy contention that the economy is back on track. Economic growth beat
forecasts by 40 basis-points in May. Real GDP growth clocked-in at
0.6%, compared to the 0.2% expectation. All things considered Canada is
on track for 3% growth this year.
Apart from household debt-loads and stalled wage growth, most of
Canada’s economic concerns remain international. Given the
protectionist rhetoric and half-bake policy notions being tweeted out of
the White House, and given that the full folly of Brexit has yet to
reveal itself, the BoC can hardly be blamed for trying to give itself
room for some future stimulus should the economic picture turn ugly.
The next rate setting is in September, but it is unlikely the central
bank will move before October when it will update its economic forecast
and its monetary policy report.